HelloFresh (HFGG.DE) could be a guinea pig for food delivery buyouts. Shares of the 2.7 billion euro company, which sells prepared ingredients and recipes to consumers, dropped 24% on Thursday after it lowered its 2023 guidance of revenue growth to 2%-5% from 2%-8% before. That’s mainly because one of its meal-prep sites faced water supply problems, and a slowdown in new customers in the United States.
CEO Dominik Richter reckons these issues are one-offs. If so, HelloFresh could be cheap. Even after considering the lower guidance, the company is profitable and growing. Yet it is valued including debt at 0.4 times sales, below lossmaking peers Just Eat Takeaway (TKWY.AS) and Delivery Hero (DHER.DE).
Assume a buyout group were to pay a 30% premium to the company’s market value, implying an enterprise value of 3.6 billion euros. If HelloFresh’s top line grows 5% annually and its margin rises modestly to 8%, then EBITDA would reach 800 million euros by 2028. An exit on the same 8.5 times multiple would value the group at 6.9 billion euros, giving the acquirer an internal rate of return of around 20%, according to Breakingviews calculations that assume borrowing of 3 times EBITDA. For a buyout group, that’s food for thought. (By Karen Kwok)
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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